Vudu (Finally) Abandons the Set-top Box

It’s been a long time coming, but over-the-top video company Vudu has finally stopped selling its set-top box, according to the NY Times, preferring instead to provide its software and video marketplace to consumer electronics manufacturers.

The move comes as some other companies — notably Roku and Boxee — pursue a strategy based on selling hardware devices that can connect Internet video onto TV sets. The Roku Player has been fairly successful so far, selling 500,000 units with the company targeting another 500,000 sold by the end of this year. And the Boxee Box, while it has yet to be released, has gotten a fair amount of buzz since it was first announced.

But even Boxee isn’t pinning all its hopes in making hardware sales. The Boxee Box itself is being manufactured by D-Link and that relationship is mainly a software licensing deal — in other words, Boxee isn’t on the hook for manufacturing and inventory costs if the product doesn’t sell. And it’s pursuing its own strategy of getting its software embedded on third-party CE devices.

While being a software player might be preferable to building and distributing hardware, that segment, too, is heating up. Multiple companies, including TiVo and Rovi, are positioning themselves to provide the software layer that enables multiple Internet video services to be offered on broadband-connected CE devices.